Kwazulu-Natal Legislature Pietermaritzburg:
Thursday, 5 August 2010
I wish to thank the Hon. Minister for taking the
time to join us in this Legislature and share his views on the
I am going to measure the effectiveness of
government spending in this province in as much as it impacts on a
single activity in the micro economy, which the government itself
strives to encourage by way of public investments into job creation.
We are all aware, as the Hon. Minister pointed
out, that KwaZulu-Natal suffers from stubborn structural
unemployment. This challenge is interlinked with other economic and
social problems such as inadequate education, poor health outcomes
and crime. As elsewhere in South Africa, in our province vulnerable
groups are most affected by unemployment and the problem is most
extreme for black youth.
The inconvenient truth is that the ratio of
workforce participation in our economy is not increasing, the income
gap is widening, and the abject poverty, both in the rural and urban
This is happening despite one grand government
scheme after another, including the failure of black economic
empowerment to reach the broad-base of the previously disadvantaged
population, the misplaced focus on creation of unsustainable jobs
through the Expanded Public Works Programme, and the lack of genuine
support for the private sector, which alone could - and should -
create sustainable jobs in our economy.
The inflexible labour laws and above-inflation
wage settlements for the employed have resulted in higher costs for
consumers and less chance of employment for the unemployed. These
policies have created an economy and society with one of the highest
unemployment rates and lowest workforce participation rates in the
While growth rates prior to the recession showed
an encouraging rise, the economy had not been able to create
sufficient numbers of sustainable jobs in the last fifteen years.
The global economic meltdown has revealed to what extent the
economic growth in post-apartheid South Africa has been driven by
consumption. The credit crunch has restricted consumer spending,
exposing the pre-recession growth as largely jobless.
Whereas prior to recession the economy merely
failed to create enough new sustainable jobs, the slump has caused
KwaZulu-Natal to shed some 200,000 jobs last year. To counter this
trend, the provincial government directly created only 21,258
so-called “job opportunities” during the same period as part of its
much lauded EPWP programme.
It is true that the number of these “job
opportunities” created has almost doubled since 2005, when the
initiative was launched in KwaZulu-Natal, the EPWP is not the answer
to our unemployment problem. By definition, EPWP “job opportunities”
are short-term, part-time jobs in which no or very little skills
transfer takes place. They are not sustainable and rewarding jobs
that help grow the economy and expand the tax base.
A response from the MEC for Public Works to my
parliamentary question about the EPWP has revealed what we on the
opposition benches have long suspected – that any single worker that
is employed in more than one "job opportunity" is counted more than
once. The duplication of beneficiaries means that in reality fewer
people than the numbers provided by the provincial government have
benefitted from the EPWP.
We believe that the funds provided for the EPWP
programme should rather be used to extend the youth employment
programme and, even more importantly, grant more assistance to small
and medium enterprises by way of top-up wage subsidies for every new
job created in the private sector.
The ANC has long objected to the wage subsidy on
the grounds that it creates second class employees without the
rights and benefits enshrined in the Basic Conditions of Employment
Act. The Hon. Minister must admit that precisely that – only with the
ruling party’s blessing.
We cannot keep pretending that we can deal with
unemployment by continuing with the status quo. If we want inclusive
growth that pulls millions of people out of poverty, we need to make
this country and this province a better place in which to do
business and create new employment opportunities of which low-wage
jobs for inexperienced, unemployed young people are the most
This can only be done by attracting private
investment into the job market. The money that government spends in
the name of job creation is the same money that the private sector
no longer has to spend to create jobs with.
The cost of doing business in South Africa remains
high and is marked by a lack of competition, inadequate
infrastructure, high input costs such as telecommunications, an
inflexible labour market in most sectors of the economy and
intrusive over-regulation. Private companies are spending too much
money, time and resources to comply with these regulations. Our laws
do not encourage private businesses to create jobs. They dictate to
potential employers who they must employ and who they cannot employ.
They also oblige employers to keep existing employees regardless of
their productivity levels.
As far as
this government is concerned, it is more important that businesses
comply with various equity quotas than that they actually turn a
profit. This window-dressing has successfully spilled over into such
areas as skills development and job training. For example, the SETAs
have become convenient vehicles to demonstrate business compliance
in contributing to the skills levy, but little serious
apprenticeship and technical training have taken place.
This robs the private sector of money, time and
resources that could have been more efficiently used by businesses
to create jobs. Over-regulation acts like any direct tax and results
in lost opportunity cost which translates into less jobs, products,
value and wealth for everyone in the economy.
Mr Chairperson, government has no sensitivity to
cost or price – as the inflated cost of public procurement shows.
Government faces no competition or threat of going out of business
by putting out a bad product – as many of its counter-productive
policies have demonstrated.
Government can lose money every year and make up for it by
simply raising taxes - as our unauthorised expenditure figures
The resources of the industrialised world were not
all endowed; most were created by entrepreneurial effort within a
congenial economic system. Entrepreneurial effort is not
manufactured by social engineers. It must be allowed to take root
naturally in an economic soil untainted by deliberate policy
At the heart of the economic success of
industrialised countries is the understanding that the private
sector is better at creating jobs than the government because it
must heed market forces or go out of business.
The only thing that government could honestly
propose to help create jobs is to remove those impediments that rob
the private sector of the ability to create its own jobs. Reducing
the size, cost and burden of over-reaching government will help.
Reducing excess regulation and bureaucracy will help. Weakening the
legal extension of sectoral bargains will help with wage moderation.
The effects of these measures will translate into
the macroeconomic area where they can arguably reduce inflation,
boost economic growth and enhance tax revenue. These, after all, are
the objectives the Hon. Minister is himself striving to achieve.
I thank you.
Contact: Roman Liptak, 078 302 0929